Tackling Africa’s jobs challenge

Tackling Africa’s jobs challenge

With their faded brickwork facades advertising cheap cleaning products and SIM cards, the modest foreign-owned convenience stores of Pretoria are a familiar sight at the heart of township life.

Yet in February, at least 20 of the unassuming businesses were reduced to pitiful scenes of desolation, their insides gutted by rampaging gangs of locals in South Africa’s latest bout of xenophobic violence. For the Nigerian and Pakistani owners lucky enough to be absent from their businesses at the time of the assault, the discovery of shattered glass, vandalised storefronts and emptied shelves represented a bitter end to the dream of a better life.

The sprawling townships of Johannesburg and Pretoria have long been a magnet for African and other migrants seeking the economic opportunities and security denied them at home. Yet it’s in these poverty-racked communities that chronic joblessness is so evident – and where locals’ frustration with a life without opportunity can develop into a toxic suspicion and hatred of outsiders.

While evidence shows that South Africa’s foreign-born workers create jobs and contribute to the economy, the 11.5% gap in unemployment between locals and foreigners fuels tension. In Gauteng province, which needs to create an estimated 400,000 jobs a year to deal with unemployment and where up to 8% of the workforce are foreign-born, according to the Migrating for Work Research Consortium, outsiders represent a visible source of grievance for left-behind locals.

Against this alarming backdrop, the Gauteng government’s problems have become a microcosm of those of Africa as a whole – how to create the millions of jobs required to keep restless, booming populations from erupting into social and political unrest. Evidence suggests that faced with this historic challenge, the continent’s governments are struggling.

Youth unemployment in sub-Saharan Africa will fall slightly to 10.8% this year, according to the International Labour Organisation (ILO), a downward trajectory that began in 2012. Yet over 70% of Africa’s workers are in vulnerable employment, compared with an average of 43.6% elsewhere.

Nine out of 10 workers in rural and urban areas are thought to hold informal jobs, while 38% of young Africans demonstrate a willingness to emigrate. Mass unemployment crosses Africa’s borders, impacting rural dwellers in conflict-racked failed states and educated graduates in developed cities.

And yet while the outlook appears formidable, current challenges are just a foretaste of the problems of the future. As Africa’s population continues its extraordinary growth – it is expected to double by 2050 – millions more young people will continue to pour into a workforce defined by fierce competition and scarce opportunity.

“It’s quite urgent at this point to rapidly create jobs for Africa,” says Albert Zeufack, the World Bank’s Africa region chief economist. “Half of Africa’s population are under 18 and for many decades to come we expect Africa to be the youngest region in the world. Every year we have roughly 190m people between the ages of 15 and 24 entering the workforce – it’s critical that African governments tackle this issue head on.”

That will require governments to reflect on why the “Africa Rising” boom years up to 2014 produced so little in the way of sustainable job creation, even while policymakers took the credit for improved economic growth. As the continent again tentatively emerges from a commodities slump, offering renewed hope of a sustainable recovery, experts believe that now is the time for Africa to enact a holistic jobs strategy – encompassing industrialisation, agricultural reform and vastly improved productivity. Only then might the worst effects of mass unemployment be averted.

“You can’t have large numbers of young people without education and employment opportunities kicking around in the street – that’s extremely dangerous,” says Aeneas Chuma, regional director for Africa at the ILO. “A young population is a tremendous resource, especially with an ageing global population, but it’s also extremely risky and an existential threat to the state – and that’s what we face now.”

Jobless growth

For the depressed mining communities that ply their trade across Southern Africa, recent years have offered little in the way of optimism. As China’s voracious appetite for commodities abated, thousands of workers from Zambia’s Copperbelt to the South African Rand were forced to down tools, returning to their homes without a regular paycheque and with little hope of alternative employment.

Yet this year’s dramatic recovery in prices has thrown a lifeline to the troubled industry. Coal mines in Mozambique’s Tete province and chrome producers in South Africa are among those summoning employees back to the rock face after months of inaction.

While that is comforting news for workers and policymakers alike, few now believe that a recovery in extractive industries alone will help to spearhead the job creation that Africa desperately needs. The Africa at Work report by global consultants McKinsey found that while resources were one of the main drivers of African economic growth from 2002 to 2010, the capital-intensive industry shed thousands of jobs over the same period.

The same report says that resources jobs account for just 1% of the continent’s stable roles, a much smaller proportion than the government, agriculture or retail sectors. Experts believe that Africa’s overreliance on resources drove the phenomenon of jobless growth.

“The sectors that drive growth are different to the sectors that drive jobs,” says Acha Leke, a senior partner in McKinsey’s Johannesburg office. The sectors that create jobs are agriculture, manufacturing, construction and retail. Governments have not focused enough on these sectors in terms of creating jobs.”

Africa’s manufacturing picture remains mixed. According to data from the Overseas Development Institute, the share of manufacturing in GDP fell from 19% in 1975 to 11% in 2014, even though exports doubled from $50bn in 2005 to $100bn in 2014. “We have to look at constraints on industrialisation. Most regions invested in excess of 20% of GDP in infrastructural development and rehabilitation over the last 50 years. In Africa that proportion has been less than 10%,” says Chuma.

“You face huge infrastructural challenges … I’m talking roads, bridges, railways, ports – all the things you need to facilitate job creation. Probably the biggest constraint in my mind is power generation.” After years of inaction, that finally appears to be changing. Overall infrastructure spending in sub-Saharan Africa is projected to grow by 10% a year, exceeding $180bn per annum by 2025, according to PwC estimates from 2014.

The hope is that this investment splurge will catch the eye of Asian manufacturing entrepreneurs, many of whom are eager to move jobs abroad as blue-collar wages rise in China. While Chinese manufacturers have made inroads into the Ethiopian and Rwandan footwear sectors, the expected rush has yet to commence.

“There’s a huge opportunity for Africa to become a manufacturing centre of the world, especially with wages rising in China and India. But China has been growing manufacturing at 16% a year, Vietnam at 13% and we’ve grown ours at 2.5% – we’re completely underperforming,” says Leke.

One reason may be that while African labour costs compare favourably to the Far East, productivity is yet to catch up. The ILO estimates that output per worker in sub-Saharan Africa grew by only 0.5% in 2015, picking up to 1.7% by this year.

The productivity challenge is even more acute in the agricultural sector – long seen as a potential engine for African job creation but hampered by outdated farming methods, limited investment and a huge skills deficit. A twin track of improving both manufacturing and agricultural productivity will be essential if Africa is to attract foreign investors to its vast labour pool, according to the World Bank’s Zeufack.

“Global trade has evolved and we’ve now moved from a trade of products to a trade in parts. There is a call for Africa to produce parts of globally traded products in a very competitive way. The second area is that of agriculture – productivity has been low for the last two decades and if we could increase that in a significant way, we could be creating high-paying jobs and exporting to the world.”

A potential panacea lies in bringing Africa’s enormous informal sector within the area of legitimate commerce. From smallholder farmers to artisanal factory owners, Africa’s talented entrepreneurs largely ply their trade outside the formal sector, leading to shortfalls in productivity, and careers eked out in tough, insecure work.

Harnessing this entrepreneurial spirit by encouraging firms to grow – rather than punishing the informal sector with further taxation – could be the way to encourage job creation. “What works is creating an environment to encourage firms to grow larger – firms will formalise themselves as size increases. That’s a more certain way to formalise than to tax them,” says Leke.

The future of work

For the thousands of graduates pouring out of Nigerian universities every year, the future appears fleetingly bright. Having successfully completed a level of education in which just 6% of their young sub-Saharan peers are enrolled, they ought to be in pole position to challenge for the best jobs. Yet a recent survey of 90,000 graduates found 47% were unemployed.

While young African students increasingly prize the university education denied to their parents – enrolment doubled between 2000 and 2010 to over 5m – most of the continent’s economies fail to provide employment opportunities for their eager young graduates. A graduate cap and a scrolled degree are no guarantee of success.

Perhaps most worryingly, they enter a world in which man is now competing with machine. The rise of automation poses challenges not just for the developed world, but for an African continent staking its future on job creation in an industrial economy. According to the World Bank’s 2016 World Development Report, at least 40% of jobs in Ethiopia, South Africa and Nigeria are vulnerable to automation.

While the prevalence of cheap labour means that developing countries are likely to be hit later than developed nations, automation is yet another trend that policymakers will have to factor into their long-term planning. Skilled graduates with technological expertise may be better placed to prosper in the workplace of the future. Turning the clock back on progress will not be an option.

“I think the fourth industrial revolution is a theme that is here to stay and economies have to prepare for it,” says Kuseni Dlamini, chairman of South African retailer Massmart. “Africa has to focus on proactively investing in the skills and productive capacity of young people so that they are well positioned to function in a knowledge-based economy that is technically powered and technologically intense.”

As automation increases efficiencies and closes off career paths, freeing workers from the rigid hierarchies of an outdated system becomes ever more important. While technology presents formidable obstacles, emerging centres of expertise in Nairobi and Johannesburg offer a glimpse of how new opportunities can be harnessed.

“The future of the workplace is changing. Now I’m not sure that young people want an eight to four job in the workplace waiting around for a pension. There’s much more mobility – people working informally, telecommuting, handling more than one job.

What is important is a holistic approach, looking at job creation where possible, but also encouraging entrepreneurship and self-employment,” says Chuma. If the idea of a laptop-wielding workforce emerging from low-skilled economies appears utopian, the need to harness such technologies to improve agricultural and manufacturing productivity is already taken for granted.

While few will argue that Africa will host the next Silicon Valley, the introduction of new forms of work and technology to boost employment and productivity in the continent’s most important sectors remains vital.

Governments must act

As ever, much will depend upon the extent to which policymakers are able to unlock the powers of the continent’s graduates and informal entrepreneurs, many of whom await decisive government leadership before undertaking their next move. From infrastructure investment and power generation to sound pro-business regulation, job creators are looking to their governments to provide a helping hand.

Without decisive intervention, it may be the policymakers themselves who pay the price for neglecting the continent’s unwaged youth, says Leke. “You see unrest already, focused in northern Nigeria and Kenya, and if we don’t address it, it will continue. You see it in the migration issue. It’s all linked to the fight for jobs and the inability of people to make a decent living on the continent. I do think in many countries on the continent governments are doing the right thing to try and expand jobs, but I think progress so far has been too slow.”

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